Capital hard to find, ARC speakers say

CHARLESTON, W.Va. -- For Ray Daffner, Appalachian Regional Commission Entrepreneurial Development Manager, there are still significant challenges and gaps in providing capital and credit for businesses and start-up firms throughout Appalachia.

Daffner was one of several panel speakers at the Appalachian Regional Commission Conference taking place this week at the Charleston Marriott.

"Access to capital and credit in Appalachia is about 18 percent below the nation," Daffner said Thursday. "But when we look at a county map of Appalachia, we see there are market disparities."

Those disparities are most evident in Central Appalachia and the 100 distressed counties in the region. Businesses there receive capital and credit at a rate that's 40 percent lower than the national average, Daffner said.

Referencing a Kauffman Foundation study out of Pepperdine University, Daffner said loan denial in Appalachia is almost three times higher than the national average.

"What that means is, that Appalachian business owners are much more likely to transform assets into a business, which creates a different level of risk," Daffner said.

The study also found the more bank branches an area has, the higher the loan volume.

Fellow panel members Marten Jenkins Jr. of Natural Capital Investment Fund, and Jennifer Giovannitti of the Federal Reserve Bank of Richmond, would like to see more networking between financial resources in Appalachia to help serve rural areas.

"Community economic development is a team effort," said Jenkins, president of NCIF in Shepherdstown. "Raising capital in West Virginia is a lot of work."

The NCIF serves eight states but focuses on Central Appalachia. Jenkins said the group of 10 employees throughout the region successfully helped more than 115 small businesses while creating more than 1,000 jobs.

They work with local economic development agencies, as well as the federal Small Business Administration on projects.

The fund is designated as a Community Development Financial Institution, which is a non-government entity, created to serve underserved communities.

Jenkins said this gives his fund and other CDFIs an advantage over traditional bank lending.

"If there is a bump in the road, most Community Development Financial Institutions, because they are committed to growing jobs, are a little more flexible and patient with our capital and are not as quick to shut a business down," Jenkins said.

Giovannitti emphasized how important it is to utilize all resources available.

"Banks bank with us," she said. "There's cash underneath us and a whole lot of it."

Because the Richmond bank serves metropolitan areas such as Washington, D.C., and Baltimore, as well as rural states like West Virginia and South Carolina, Richmond has a lot of data and networking to offer Appalachia, Giovannitti said.

The bank's website (www.richmondfed.org) lists community resources, lending data broken down by state and county and an assortment of other tools Giovannitti hopes people will take advantage of.

"Our programs are always free," she said. "What we host and what we do is free for the public to use."